Is cloud computing the ultimate IT solution for SMEs?

Cloud computing might look like the answer to a lot of the resource problems facing SMEs, but as lawyer Stuart Clout explains there are two sides to every coin and the flip side raises issues of privacy, ownership and access.

Like many tough questions, the answer is a little bit yes and a little bit no.

What's good about cloud computing?

The best way to think of the cloud is that it is a reference to internet-based services. Like hotmail.

The cloud is cool because it offers endless scope for the business world. It enables SMEs in particular to harness the power and scale of the likes of Google for themselves.

Many businesses use Google docs (TM) as their application and data hosting solution. This saves them paying licence fees for software and having to own and manage their own servers to store all the information.

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Stuart Clout

A cloud service can grow (and shrink) with you. As you get bigger you can just buy more space or bandwidth. If times are slow, you can scale back your use and reduce your costs. You can't do that once you've splurged on a super fast formula one server and an IT system that takes up half the tea room.

Flexibility, scalability and costs are the “yes” part of the answer to the question.

What's bad about cloud computing?

Let me tell you a cautionary tale. I once had a UK client who used a third party to host their customer database and update it when the client sent through update files.

The client would access the database via the internet through a secure site set up by the service provider.

After many years, the client decided they wanted to move to another provider. The service provider was asked to send a copy of the database back in the format needed to pass it on to the new provider.

The service provider said NO! In fact, they said they would not send it in the required format, nor indeed in any format, as the contract didn't require them to do so.

They helpfully suggested that the client should have kept its own copy. Oh, they also offered to send it in the required format for an astronomical fee.

As you can imagine, it was difficult to explain to the CEO that if he wanted to get hold of his own customer list, he'd have to pay through the nose for it. (Just for the record, I'm not the lawyer who drafted the original contract!)

So think about data ownership, formats and termination arrangements from the very outset.

Let's say you've got a 6pm client meeting and need to get your PowerPoint display off your web hosted server. What happens if the internet is down in California because it's midnight in LA? Or maybe your host is doing some maintenance?

Access to your data is subject to connectivity and server up time, so consider that too.

What happens if your data leaks out of the cloud?

Ask the 77 million Sony Playstation users who had their credit card details unlocked and available on the internet. Sobering thought, right? It is vital to keep in mind your brand's reputation and the potential breach of your contracts with customers who may have confidentiality rights against you.

Cloud computing is powerful, but don't get totally blinded by the upside. Proceed with caution: there's always another side to the coin.

Stuart Clout is a lawyer who specialises in retail and technology law. Stuart was formerly a senior lawyer for Tesco, advising it on commercial legal issues relating to both its physical and e-commerce environments.